Is it the end of the road for the Euro?
- Thread starter Oscaresque
- Start date
Following example shows what inflation (i.e. monetary devaluation) does to debt:
Let's say you owe €1000 and inflation is 5% p/a. In a years time the €1000 is only worth €950, i.e. €1000 will only buy what €950 bought the year before. It's like the creditor telling you today that you can settle your debts for 5% less.
Onthe other hand, your savings are adversely affected:
€1000 in savings will only buy €950 worth of goods in a year, when inflation is 5% p/a.
ringledman
Registered User
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Inflation is only good for individuals if their earnings are keeping up with the rate of inflation.
There is no point having inflation erroding the value of one's debt if the cost of living is rising at a rate above one's earnings increases. The net effect is a reduction in living standards as prices rises and the individual still needs to pay back the debt at at the original nominal rate.
The problem facing the West is that living costs are likely to rise whilst earnings lag the true rises in costs. This is happening hugely in the UK at present. Will it happen in the EU as import costs rise (due ot a weak currency) and the ECB starts printing?
T
thejokerman
Guest
all
This is a point a lot of people overlook. This round of inflation is different than the 70s as there is no way employers/govt will increase wages.
This is a point a lot of people overlook. This round of inflation is different than the 70s as there is no way employers/govt will increase wages.
C
Chocks away
Guest
That may be the reason why IBEC have said that 22% of employers have replied that they would hike wages in 2011
. "It will be the first time in the last few years that employers are contemplating pay increases," said Brendan Butler, IBEC director of international affairs. The above was reported in last Monday's papers.B1e2r3n4a5rd
Registered User
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If we had our own currancy, like the old punt, it would suffer a reduced in value by 40% over the last few years and we would have inflation of about 25%.
This would have the effect of reducing relative incomes by 40% and inflation would solve the negative equity problim.
We cannot paying our public servents twice what they do in Great Britain.
If we do not change to our own currency within 18 months the government will take .20% of our money out of our accounts to pay public servents.
Ireland in total owes to foreigners €1,600 Billion i.e.about $400K per capita.
We are the most indebited country in the world Greese is only the 16Th
This would have the effect of reducing relative incomes by 40% and inflation would solve the negative equity problim.
We cannot paying our public servents twice what they do in Great Britain.
If we do not change to our own currency within 18 months the government will take .20% of our money out of our accounts to pay public servents.
Ireland in total owes to foreigners €1,600 Billion i.e.about $400K per capita.
We are the most indebited country in the world Greese is only the 16Th
C
Chris Gough
Guest
I think this is one of the ramifications of a single currency, that there needs to be strong wage flexibility. Because the currency can't devalue the only way to remain competitive in tough times if to experience wage deflation.